October 23, 1981
Ms. Lynn A.Moran
Custer County State's Attorney
Custer County Courthouse
Custer, South Dakota 57730
Official Opinion No. 81-40
Investment of County Funds
Dear Ms. Moran:
You have requested an official opinion from this office in regard to the following factual situation:
FACTS:
SDCL 7-20-1 and SDCL 7-20-1.1 make reference to the banks and savings and loan associations which can be considered official depositories for county funds.
It is my understanding that in some counties of the state, Federal Credit Unions are used as official and eligible depositories.
Based on the above facts, you have asked the following questions:
QUESTIONS:
1. Does SDCL 7-20-1.1 also include Federal Credit Unions which are regulated by the Federal Credit Union Authority?
2. Is it permissible for the county to invest county funds in Federal Credit Unions?
IN RE QUESTION NO. 1:
SDCL § 7-20-1.1 provides:
Domestic savings and loan associations whether chartered by this state or by the United States are hereby designated as official depositories for county funds; provided such funds shall be invested only in the accounts of such associations which are insured by the federal savings and loan insurance corporation, and the amount to invested in any one association shall not exceed the amount which is covered by such insurance. Provided further that such funds shall only be deposited with savings and loan associations located within the county where the funds originate.
Therefore, a Federal Credit Union may be designated an official depository for county funds, pursuant to § 7-20-1.1 only if the Federal Credit Union is a 'Domestic savings and loan association whether chartered by this state or by the United States.'
In my opinion, a Federal Credit Union is not a savings and loan chartered by the United States because a Federal Credit Union does not meet the South Dakota statutory definition of federal savings and loan association. SDCL § 52-1-1(3) reads as follows:
(3) 'Federal savings and loan association' shall mean a savings and loan association organized pursuant to the Home Owner's Loan Act of 1933, as amended.
Insofar as SDCL § 2-14-4 reads as follows, 'Whenever the meaning of a word or phrase is defined in any statute such definition is applicable to the same word or phrase wherever it occurs except where a contrary intention plainly appears,' and insofar as Federal Credit Unions are not organized pursuant to the Home Owner's Loan Act of 1933 as amended, it is my opinion that Federal Credit Unions are not included in the phrase savings and loan associations as that phrase is used in § 7-20-1.1.
IN RE QUESTION NO. 2:
In response to your second question asking whether or not the county can invest county funds in a Federal Credit Union, it is essential that SDCL § 4-5-6, reading as follows, be considered:
Any public funds which will not be needed for current operating expenses, may be invested in securities of the United States and securities guaranteed by the United States government either directly or indirectly and redeemable within eighteen months from the date of purchase. The maturity date may exceed eighteen months. Provided, however, that permanent, trust, retirement and building funds may be invested in securities having a redeemable date beyond eighteen months.
It is imperative to note that investments are authorized by § 4‑5‑6 only in securities of or guaranteed by the United States of America. In 1967-68 A.G.R. at p. 20, securities were defined as 'any governmental loan which is fully insured.' Since deposits in Federal Credit Unions are not governmental loans, it is my opinion that deposits in Federal Credit Unions are not securities. Therefore, county funds may not be invested in Federal Credit Unions.
I would further note that deposits in banks and savings and loans may not meet the securities requirement either. However, banks and savings and loans are authorized depositories per SDCL § § 7-20-1 and 7-20-1.1.
Respectfully submitted,
Mark V. Meierhenry
Attorney General
